Corporate Governance Survey - 2017 Proxy Season Results

Corporate Governance Trends

A Comparison of Large Public Companies and Silicon Valley Companies

As outside legal counsel to a wide range of public companies in the technology and life sciences industries, many of which are based in Silicon Valley, Fenwick has collected information on corporate governance in order to counsel our clients on best practices and industry norms. We have collected this data since 2003 and believe this unique body of information is useful for all Silicon Valley companies as well as other public companies in the United States and their advisers. Download the complete report.

Fenwick’s annual survey covers a variety of corporate governance practices and data for the companies included in the Standard & Poor’s 100 Index (S&P 100), which are often presented as a desired norm, compared to the technology and life sciences companies included in the Silicon Valley 150 Index (SV 150), where the needs and circumstances of public companies can be quite different.

Comparative data is presented for the S&P 100 companies and the SV 150, as well as trend information over the history of the survey. In a number of instances the report also presents data showing comparison of the top 15 (which are of a scale similar to the S&P 100), top 50, middle 50 and bottom 50 companies of the SV 150 (in terms of revenue), illustrating the impact of scale on the relevant governance practices.

This in-depth survey was developed as a resource for board members, senior executives, in house legal counsel and their advisers, based in Silicon Valley and throughout the United States.

Key Findings Include:

Dual-Class Voting Stock Structure

Adoption of dual-class voting stock structures has emerged as a recent clear trend among Silicon Valley technology companies—among the mid-to-larger SV 150 companies—though it is still a small percentage of companies.

Historically, dual-class voting stock structures have been significantly more common among S&P 100 companies than among SV 150 companies, though the frequency in the SV 150 (11.3% in 2016 to 10.9% in 2017) has surpassed the S&P 100 (9.0% in both 2016 and 2017) in recent years.

Classified Boards

Classified boards are now significantly more common among SV 150 companies than among S&P 100 companies. Compared to the prior year, classified boards remained fairly consistent, holding steady at 6.7% for the top 15 companies in the SV 150 while the S&P 100 has been at 4.0% since 2016.

Majority Voting

The rate of implementation of some form of majority voting has risen substantially over the period of this survey.

The increase has been particularly dramatic among S&P 100 companies, rising from 10% to 97% between the 2004 and 2017 proxy seasons. Among SV 150 companies, the rate has risen from zero in the 2005 proxy season to 59.9% in the 2017 proxy season.

Stock Ownership Guidelines

The prevalence of stock ownership guidelines has generally increased over time in both groups but the SV 150 only recently surpassed the level of the S&P 100. This year’s edition of the survey includes additional detail regarding the minimum holding amount and period requirements for executives and directors.

Board Diversity

2017 continued the long-term trend in the SV 150 of increasing numbers of women directors and declining numbers of boards without women members.

The rate of increase in women directors for SV 150 overall continues to be higher than among S&P 100 companies. When measured as a percentage of the total number of directors, the top 15 of the SV 150 now slightly exceed their S&P 100 peers (the top 15 averaged 25.4% women directors in the 2017 proxy season, compared to 23.9% in the S&P 100).

Companies with at least one woman director went from 74% to 78.2% over the past year for the SV 150. Over a two-year period the percentage of companies with at least one woman director grew by 10 percentage points.

Executive Officers

The number of executive officers tends to be substantially lower among SV 150 companies than among the S&P 100, and there continues to be a general decline in the average number of executive officers per company in both groups.

By contrast, the percentage of companies including General Counsel, Chief Legal Officer or a Chief Technology Officer or engineering executive as “executive officers” have been on a long-term upswing.